Piyush Goyal's threat-III: ONGC is no longer a low cost producer of oil

May 02: The advent of electric cars may not be great news for E&P companies as well.8Even though the the immediate outlook for crude and gas prices remains bullish because of OPEC led cuts and rise in demand, the medium to long term outlook will have to grapple with the fact that the world has more oil and gas reserves than it can viably burn.8By a set of alternative estimates, the demand for crude is expected to dip from as early as 2025 while some say that this will happen in 2030.8Then again, nearly 65 per cent of total discovered oil resources since 2000 in the Middle East have not been put into development yet. Given the majority of these discoveries have a breakeven price below US$40/bbl, these fields are likely to be put onstream even if low oil prices prevail for a longer time,8In this context, any investment in exploration in India is perhaps not worth the effort -- since exploration to production period is usually five to seven years or more in India -- unless the cost economics are comparable with other low cost producers in the world.8ONGC had once prided itself as being a low cost producer from its nomination blocks8But that does not seem to be case, as is evident when its cost of production is compared with other large global producers8What is more, its cost of production is now more than that of average global breakeven level8Will the company take all these factors into account when monetizing its new discoveries?Click on Reports for more